Testimony at the HFSC hearing: “Examining Environmental and Social Policy in Financial Regulation”

Keith Ellison is the Attorney General of Minnesota. This post is based on his testimony.

As Attorney General, I serve on the governing board of the Minnesota State Board of Investment, which we call the SBI. The SBI is a fiduciary for $125 billion in assets, serving more than 820,000 active and retired Minnesota public employees.

Active public employees entrust us with a portion of their salaries in return for a secure retirement.

Public employers across the state entrust us with a portion of their balance sheets in return for a critical future benefit for their employees.

I am proud that the SBI pays out more than $5 billion a year in benefits to our members. In many cases, these benefits are the recipient’s most important financial asset.

One of our values is that addressing environmental, social, and governance-related issues can and does lead to positive outcomes and adds long-term value to our investments.

Year over year, the Minnesota SBI is one of the highest-performing public pension funds in America. ESG best practices and high market returns go hand in hand.

Minnesota’s public employees want us to invest wisely so their retirement is secure.

As their fiduciaries, we have a duty to carefully consider all relevant investment risks and opportunities on their behalf. Their future is in our portfolio.

Indeed, it is the duty of fiduciaries in every sector to consider the risks and opportunities that could impact their investments and their businesses.

The private sector now overwhelmingly considers ESG risk factors in investing. This is why 96% of the largest 250 global companies now issue a sustainability report. They don’t do it out of the goodness of their hearts. They do it because it’s good for business, shareholders, pensioners, and profits.

ESG is nothing more than looking clear-eyed at risks and opportunities in the real world and making sound investment decisions on that basis. As Illinois State Treasurer Mike Frerichs plainly stated in another congressional hearing: “ESG is data.” And data shows a positive correlation between ESG principles and returns on equity.

Despite this data, in states across this country there is a concerted attack on the freedom to invest. This attack is already leading to more costs and lower returns for businesses, pensioners, and taxpayers. For example:

  • According to an academic paper published by the Social Science Research Network, anti-free market legislation may have cost taxpayers in Texas up to $532 million in higher interest costs in just one year.
  • According to Reuters, an anti-sustainable investing bill in Indiana could cut state pension returns by $6.7 billion over the next 10 years.
  • According to the publication Institutional Investor, Kansas could lose upwards of $3.6 billion in the same time frame from a similar bill.

But perhaps these bills are not about data. Perhaps they have nothing to do with ESG at all. Perhaps they are about running roughshod over the freedom to invest in order to protect one industry in particular, the fossil-fuel industry — the industry that bears so much responsibility for the costs of climate change and has waged a decades-long campaign of deception to deflect it.

Prohibiting investors and asset managers from considering ESG factors is interfering with the free market. Censoring relevant financial information is exactly what Congress should not be doing. Legislation that attempts to hijack the freedom to invest is a threat to the financial security of retirees and families in every state.

Most Americans don’t know what ESG means, but it’s actually a bread-and-butter issue. To anyone who wants to ignore ESG risk, I say: bet your own money. But don’t gamble with Americans’ life savings.

I urge you to join me in standing up for Americans’ freedom to invest and standing up against anti-ESG bills that interfere with our freedom.

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